Tuesday, April 15, 2008

McCain Would Increase Medicare Part D Premiums for High Income Seniors--A Small Step in the Right Direction

As part of his broader speech on economic issues John McCain today called for high income seniors to pay more for their Part D drug coverage. Couples making more than $160,000 a year would pay higher premiums.

This is a good idea and a down payment on something I believe is ultimately unavoidable--means testing for entitlement programs.

It isn't news that the cost of senior programs--Medicare, Social Security, and Medicaid--are not sustainable. The current federal cost for these three programs now tops $27,000 a year for each senior over the age of 65. That number increased 24% since 2000--after adjusting for inflation.

Part D alone added $8 trillion to Medicare's 75-year unfunded liability--twice the unfunded liability of the entire Social Security system and a fourth of Medicare's overall unfunded liability.

[Part D was an irresponsible expansion of entitlement programs that John McCain voted against.]

The cost of these entitlement programs is unsustainable in the long-term.

Some believe that a better use of the market will help us control costs. Some believe that more use of the government is needed to control costs. Either way, market competition or government controls, means paying out less to someone.

Many people believe means testing--the richer getting less or paying more for these benefits--is bad policy because it has the potential of creating a two-tiered system. They worry that if the more wealthy don't share in these generous benefits we will lose important political support for these entitlement programs and the less well off will suffer. That is possible.

But when the day is done, how are we going to control these costs and just who is it that will get less? Will it be seniors, drug companies, insurers, doctors, hospitals? Well likely all of these. But why not the better off getting less help as well?

Means testing would appear to me to be the easiest way to reduce the cost of these programs and do the least harm.

McCain is on the right track here and I hope he takes means testing even further.

Earlier posts:

An Analysis of Senator John McCain's Health Care Reform Plan

Means Testing for Medicare--It's Unavoidable If Politically Problematic

Good Riddance to Karl Rove--How Part D Left an $8 Trillion Debt and Got Them Nothing
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